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Article Date:
August 2012


Word Count:
1171

 

 

How to Release Rental Property Tax Losses Trapped by the Passive-Loss Rules


In 1986, lawmakers drove a stake through the heart of your rental property tax deductions.

 

That stake, called the passive-loss rules, causes myriad complications that now, 26 years later, are still commonly misunderstood.

 

The Trap

 

In 1986, lawmakers made you shovel your taxable activities into three basic tax buckets. Looking at the buckets with business eyes, you find the following buckets:

 

1.

Portfolio bucket for your stocks and bonds

2.

Active business bucket for your material participation business activities

3.

Passive-loss bucket for your rentals and other activities in which you do not materially participate

 

This article explains three escapes from the passive-loss trap so that you can realize the tax benefits from your rental losses.

 

Escape 1

 

Get out of jail free. Lawmakers allow taxpayers with modified adjusted ... Log in to view full article.

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